An assumption could be that a metro, suffering the double-whammy punch of a mild recession and a major hurricane, might be a turn-off for investors. However, panelists during the “Gauging the Climate: Capital Looking to Houston” session at the recent Connect Houston conference did their best to bust that assumption.

The double-whammy involved falling oil prices (that are on the rebound) and Hurricane Harvey (September 2017’s huge rainmaker), both of which impacted Houston commercial real estate. Despite all of that, “Houston has hit the bottom. Actually, we’re past the bottom,” said Clarion Partners’ Spence Sowa.

The panel, moderated by Steve Pumper of Transwestern, began its discussion with the struggling office sector. The speakers were cautiously optimistic about the office sector, with the emphasis on “cautiously.” Tom Patterson with Lionstone Investments indicated that much of the bleeding has stopped, stability is creeping into the space with “the supply spigot worked through.” Additionally, “one in every four floors of office space is vacant,” Patterson remarked, “But we’ll see some of that fill up.”

Steve Azar with Stockbridge Capital pointed out that one thing in Houston’s favor is that it’s gone through a correction, especially in the office sector, and is moving forward. On the down side, “there was no distress in the system we were hoping for; no one is putting pressure on owners to sell,” he said. Still, now that the market is stabilizing, “Houston is at an interesting point,” Azar added.

But Kevin Westra with Northwestern Mutual Real Estate wasn’t so certain, noting that his company has been tightening spreads on the debt side when it comes to office. He explained that Northwestern Mutual did a lot of office lending in Houston in 2011-2013, with a low basis per square foot. When it comes to new office loans, however, “I’m cautious,” he said. “I want to wait and see. I still like Houston as a long-term play; there is a lot of diversity in the economy versus 20 years ago.” Still, Westra commented, he wanted to see a few more positive trends before giving Houston’s office sector a 100% thumbs-up.

On the opposite side of the spectrum is industrial. TH Real Estate’s Duane Hale expressed enthusiasm for the asset class, noting that the company’s smaller funds are actively looking for properties. “The larger funds are where they need to be right now,” he explained. “With the smaller funds, we’re taking a look at some of the industrial assets. That, and multifamily, are the darlings of what our funds are looking at across the country.” Meanwhile, Sowa indicated that Clarion’s Lion Industrial Trust (LIT) fund is actively looking for Houston industrial properties. “Houston is no. 1 on our list as far as industrial assets are concerned,” he said. “We have a queue of capital looking to get into LIT.”

The panelists were somewhat mixed on retail, noting that lifestyle and grocery-anchored core assets were likely to be of interest. Azar noted that retail is “going through a period of dislocation,” while Hale acknowledged that core-plus scenarios are likely to be more interesting. Meanwhile, Westra and Pumper were emphatic that the right owner/operator was also hugely important. “People want to get out and about,” Pumper added. “You need a good owner/operator who can drive it. “If you can create an experience with retail, it makes it unique.”